HSBC Saudi Industrial Companies Equity Fund
(Managed by HSBC Saudi Arabia)
UNAUDITED INTERIM CONDENSED FINANCIAL
STATEMENTS AND INDEPENDENT AUDITOR’S REVIEW REPORT
FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021
Interim condensed statement of financial position
As at 30 June 2021
The accompanying notes 1 to 12 form an integral part of these unaudited interim condensed financial statements.
Note
30 June 2021 (Unaudited)
SR
31 December 2020 (Audited)
SR ASSETS
Bank balance 1,577,338 838,544
Financial assets at fair value through profit or loss (FVTPL) 4 128,773,682 115,156,978
Receivables and advances 946,311 2,032,603
──────── ────────
TOTAL ASSETS 131,297,331 118,028,125
════════ ════════
LIABILITIES
Management fee payable 5 49,590 19,018
Accrued expenses and other payables 6 82,898 83,313
──────── ────────
TOTAL LIABILITIES 132,488 102,331
──────── ────────
EQUITY
Net assets attributable to unitholders of redeemable units 131,164,843 117,925,794
──────── ────────
TOTAL LIABILITIES AND EQUITY 131,297,331 118,028,125
════════ ════════
Redeemable units in issue 11,651,806 13,220,225
════════ ════════
Net asset value attributable to each per unit 11.26 8.92
════════ ════════
HSBC Saudi Industrial Companies Equity Fund
Interim condensed statement of comprehensive income (unaudited)
For the six-month period ended 30 June 2021
The accompanying notes 1 to 12 form an integral part of these unaudited interim condensed financial statements.
3
Note 30 June 2021
SR
30 June 2020
SR
INCOME
Net unrealized gain / (loss) on financial assets at FVTPL 15,524,242 (1,683,045) Net realized gain / (loss) on disposal of financial assets at FVTPL 14,134,164 (2,096,116)
Dividend income 1,468,117 1,590,266
Other income 788 -
──────── ────────
TOTAL INCOME / (LOSS) 31,127,311 (2,188,895)
──────── ────────
EXPENSES
Management fees 5 1,230,224 879,892
Other expenses 7 123,006 94,844
──────── ────────
TOTAL EXPENSES 1,353,230 974,736
──────── ────────
NET INCOME / (LOSS) FOR THE PERIOD 29,774,081 (3,163,631)
OTHER COMPREHENSIVE INCOME FOR THE PERIOD - -
──────── ────────
TOTAL COMPREHENSIVE INCOME / (LOSS) FOR THE
PERIOD 29,774,081 (3,163,631)
════════ ════════
Interim condensed statement of changes in equity attributable to the unitholders (unaudited)
For the six-month period ended 30 June 2021
The accompanying notes 1 to 12 form an integral part of these unaudited interim condensed financial statements.
2021
SR 2020
SR EQUITY AT THE BEGINNING OF THE PERIOD 117,925,794 109,685,846
───────── ─────────
Net income / (loss) for the period 29,774,081 (3,163,631)
Other comprehensive income for the period - -
───────── ─────────
Total comprehensive income / (loss) for the period 29,774,081 (3,163,631)
Issue of units during the period 2,207,118 32,209
Redemption of units during the period (18,742,150) (870,151)
───────── ─────────
Net changes (16,535,032) (837,942)
───────── ─────────
EQUITY AT THE END OF THE PERIOD 131,164,843 105,684,273
═════════ ═════════
Units Units
REDEEMABLE UNIT TRANSACTIONS
Transactions in redeemable units during the period are summarised as follows:
UNITS AT THE BEGINNING OF THE PERIOD 13,220,225 13,545,590
───────── ────────
Issue of units during the period 214,419 4,596
Redemption of units during the period (1,782,838) (113,598)
───────── ────────
Net decrease in units (1,568,419) (109,002)
───────── ────────
UNITS AT THE END OF THE PERIOD 11,651,806 13,436,588
═════════ ════════
HSBC Saudi Industrial Companies Equity Fund Interim condensed statement of cash flows (unaudited)
For the six-month period ended 30 June 2021
The accompanying notes 1 to 12 form an integral part of these unaudited interim condensed financial statements.
5
2021
SR 2020
SR
Operating activities
Net income / (loss) for the period 29,774,081 (3,163,631)
Adjustments to reconcile net income / (loss) to net cash flows from operating activities:
Movement in unrealised (gain)/loss on financial assets at FVTPL (15,524,242) 1,683,045 Working capital adjustments:
Decrease in financial assets at FVTPL 1,907,538 2,097,901
Decrease / (increase) in receivables and advances 1,086,292 (154,657)
Increase / (decrease) in management fee payable 30,572 (6,330)
Decrease in accrued expenses and other payables (415) (29,716)
───────── ─────────
Net cash flows from operating activities 17,273,826 426,612
───────── ─────────
Financing activities
Proceeds from issuance of units 2,207,118 32,209
Payment on redemption of units (18,742,150) (870,151)
───────── ─────────
Net cash flows used in financing activities (16,535,032) (837,942)
───────── ─────────
Net increase / (decrease) in bank balance 738,794 (411,330)
Bank balance at the beginning of the period 838,544 10,137,549
───────── ─────────
Bank balance at the end of the period 1,577,338 9,726,219
═════════ ═════════
Notes to unaudited interim condensed financial statements
At 30 June 2021
1. INCORPORATION AND ACTIVITIES
HSBC Saudi Industrial Companies Equity Fund (the “Fund”) is an open-ended investment fund created by an agreement between HSBC Saudi Arabia (the “Fund Manager”) and investors (the “Unitholders”) in the Fund. The address of the Fund Manager is as follows:
HSBC Saudi Arabia, Head Office HSBC Building 7267
Olaya Street (Al-Murooj District) Riyadh 12283-2255
Kingdom of Saudi Arabia
HSBC Saudi Industrial Companies Equity Fund (“the Fund”) is an investment fund established through an agreement between HSBC Saudi Arabia (“the Fund Manager”) and investors (“the Unitholders”).
The objective of the Fund is to achieve capital appreciation over the medium to long-term by investing in sharia compliant equities listed on Tadawul (Saudi Stock Market) and categorised under petrochemical, industrial investment, building and construction, and agriculture and food manufacturing sectors.
The Fund is managed by the Fund Manager who also is the market maker, administrator and custodian of the Fund. All income is reinvested in the Fund and is reflected in the unit price.
2. REGULATING AUTHORITY
The Fund is governed by the Investment Fund Regulations (the “Regulations”) issued by the CMA on 3 Dhul Hijja 1427H (corresponding to 24 December 2006) and effective from 6 Safar 1438H (corresponding 6 November 2016) by the New Investment Fund Regulations (“Amended Regulations”) published by the CMA on 16 Sha’aban 1437H (corresponding to 23 May 2016) detailing requirements for all funds within the Kingdom of Saudi Arabia. The Regulations were further Amended by Resolution of the Board of the Capital Market Authority Number 2-22-2021 Dated 12/7/1442H. Corresponding to 24/2/2021G.
3. BASIS OF PREPARATION AND CHANGES TO ACCOUNTING POLICIES 3.1. Basis of preparation
These unaudited interim condensed financial statements for the six-month period ended 30 June 2021 have been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) as endorsed in the kingdom of Saudi Arabia.
The unaudited interim condensed financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Fund’s annual financial statements as at 31 December 2020.
The unaudited interim condensed financial statements have been prepared on a historical cost basis, using the accrual basis of accounting except for financial assets held at FVTPL that are measured at fair value. These unaudited interim condensed financial statements are presented in Saudi Arabian Riyals (“SR”), which is the Fund’s functional currency.
All financial information presented has been rounded to the nearest SR.
3.2 New standards, interpretations and amendments
The accounting policies adopted in the preparation of the interim condensed financial statements are consistent with those followed in the preparation of the Fund’s annual financial statements for the year ended 31 December 2020. except for the adoption of new standards effective as of 1 January 2021. The fund has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
Several amendments apply for the first time in 2021, but do not have an impact on the interim condensed financial statements of the fund.
HSBC Saudi Industrial Companies Equity Fund
Notes to unaudited interim condensed financial statements (continued)
At 30 June 2021
7
3. BASIS OF PREPARATION AND CHANGES TO ACCOUNTING POLICIES (continued) 3.2 New standards, interpretations and amendments (continued)
Interest Rate Benchmark Reform–Phase 2: Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR).
The amendments include the following practical expedients:
• A practical expedient to require contractual changes, or changes to cash flows that are directly required by the reform, to be treated as changes to a floating interest rate, equivalent to a movement in a market rate of interest
• Permit changes required by IBOR reform to be made to hedge designations and hedge documentation without the hedging relationship being discontinued
• Provide temporary relief to entities from having to meet the separately identifiable requirement when an RFR instrument is designated as a hedge of a risk component
These amendments had no impact on the interim condensed financial statements of the Fund.
The Fund intends to use the practical expedients in future periods if they become applicable.
4. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (FVTPL)
The composition of the investment’s portfolio on the last valuation day of the period/year end is summarised below:
30 June 2021 (Unaudited)
% of Market
value Cost
SR Market value SR
Unrealised gain (loss), net
SR Investments in equities (by sector)
Materials 67.3 63,760,140 86,639,359 22,879,219
Food and Beverage 14.2 13,450,146 18,305,923 4,855,777
Energy 6.6 8,084,304 8,489,216 404,912
Capital Goods 4.8 4,994,749 6,140,887 1,146,138
Pharma, Biotech and Life Science 4.2 3,427,729 5,457,843 2,030,114
Commercial and Professional Services 2.9 3,745,626 3,740,454 (5,172)
───────── ───────── ───────── ─────────
Total 100.0 97,462,694 128,773,682 31,310,988
═════════ ═════════ ═════════ ═════════
The above equity investments are listed on the Saudi Stock Exchange (“Tadawul”). The Fund Manager seeks to limit risk for the Fund by monitoring exposures in each investment sector and individual securities.
31 December 2020 (Audited)
% of Market
value Cost
SR Market value SR
Unrealised gain (loss), net
SR Investments in equities (by sector)
Materials 50.4 49,203,824 57,981,718 8,777,894
Food and Beverage 23.7 20,553,602 27,331,982 6,778,380
Energy 14.4 15,844,411 16,590,595 746,184
Capital Goods 5.4 7,026,391 6,186,657 (839,734)
Pharma, Biotech and Life Science 3.2 3,250,613 3,678,175 427,562
Commercial and Professional Services 2.9 3,491,391 3,387,851 (103,540)
───────── ───────── ───────── ─────────
Total 100.0 99,370,232 115,156,978 15,786,746
═════════ ═════════ ═════════ ═════════
Notes to unaudited interim condensed financial statements (continued)
At 30 June 2021
5. TRANSACTIONS WITH RELATED PARTIES A. Transactions and balances with Fund Manager
In the ordinary course of its activities, the Fund transacts business with related parties. The following are the details of major related party transactions during the period:
Related party Nature of
transactions
Amount of transactions Balance 2021
SR 2020
SR 2021
SR 2020
SR HSBC Saudi Arabia
(Fund Manager) Fund management fee 1,230,224 879,892 49,590 19,018
Administration fee 36,183 25,879 6,331 5,711
Board member fee 9,918 9,891 10,247 16,118
Saudi British Bank
(Parent of Fund Manager) Cash at bank - 4,885
The Fund pays the Fund Manager a management fee calculated at an annual rate of 1.7% per annum calculated on the total asset value at each valuation date. The fee is intended to compensate the Fund Manager for administration of the Fund.
The units in issue at 30 June 2021 include 40,937 units held by the employees of the Fund Manager (31 December 2020: 42,618 units).
There are no units in issue as at 30 June 2021 (31 December 2020: Nil units) that are held by the Fund Manager.
The Saudi British Bank (“SABB”) (parent of the Fund Manager) acts as the Fund’s banker.
B. Transactions with Board of Directors
The independent directors are entitled to remuneration for their services at rates determined by the Fund’s terms and conditions in respect of attending meetings of the board of directors or meetings of the Fund. Independent director’s fees are currently SR 5,000 per meeting up to a maximum of 2 meetings per annum per director which is paid equally by all funds supervised by the board.
6. ACCRUED EXPENSES AND OTHER PAYABLES
30 June 2021 (Unaudited)
SR
31 December 2020 (Audited)
SR
Accrued expenses 27,183 30,744
Benchmark fee payable 15,539 7,840
Board of directors’ fees payable 10,247 16,118
Administrator fee payable 6,331 5,711
Other payables 23,598 22,900
───────── ─────────
82,898 83,313
═════════ ═════════
HSBC Saudi Industrial Companies Equity Fund
Notes to unaudited interim condensed financial statements (continued)
At 30 June 2021
9 7. OTHER EXPENSES
2021 (Unaudited)
SR
2021 (Unaudited)
SR
Custodian fees 41,970 17,166
Administrator fees 36,183 25,879
Professional fees 17,108 15,578
Board of directors’ fees 9,918 9,891
Benchmark fees 7,699 7,010
Others 10,128 19,320
───────── ─────────
123,006 94,844
═════════ ═════════
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Fund has only investments at fair value through profit or loss which is measured at fair values and are classified within level 1 of the fair value hierarchy. All other financial assets and liabilities are classified as amortized cost and management believes that the fair value of all other financial assets and liabilities at the reporting date approximate their carrying values owing to their short-term tenure and the fact that these are readily liquid. These are all classified within level 2 of the fair value hierarchy. There were no transfers between various levels of fair value hierarchy during the current period or prior year.
9. MATURITY ANALYSIS OF ASSETS AND LIABILITIES
The table below shows an analysis of assets and liabilities according to when they are expected to be recovered or settled respectively:
As at 30 June 2021 (Unaudited)
Within
12 months After
12 months Total
SR SR SR
ASSETS
Bank balance 1,577,338 - 1,577,338
Financial assets at FVTPL 128,773,682 - 128,773,682
Receivables and advances 946,311 - 946,311
───────── ───────── ─────────
TOTAL ASSETS 131,297,331 - 131,297,331
═════════ ═════════ ═════════
LIABILITIES
Management fee payable 49,590 - 49,590
Accrued expenses and other payables 82,898 - 82,898
───────── ───────── ─────────
TOTAL LIABILITIES 132,488 - 132,488
═════════ ═════════ ═════════
Notes to unaudited interim condensed financial statements (continued)
At 30 June 2021
9. MATURITY ANALYSIS OF ASSETS AND LIABILITIES (continued)
As at 31 December 2020 (Audited)
Within
12 months After
12 months Total
SR SR SR
ASSETS
Bank balance 838,544 - 838,544
Financial assets at FVTPL 115,156,978 - 115,156,978
Receivables and advances 2,032,603 - 2,032,603
───────── ───────── ─────────
TOTAL ASSETS 118,028,125 - 118,028,125
═════════ ═════════ ═════════
LIABILITIES
Management fee payable 19,018 - 19,018
Accrued expenses and other payables 83,313 - 83,313
───────── ───────── ─────────
TOTAL LIABILITIES 102,331 - 102,331
═════════ ═════════ ═════════
10. LAST VALUATION DAY
The last valuation day of the period/year was 30 June 2021 (year ended 31 December 2020: 31 December 2020).
11. IMPACT OF COVID-19 ON THE INTERIM CONDENSED FINANCIAL STATEMENTS
During March 2020, the World Health Organisation (“WHO”) declared the Coronavirus (“COVID-19”) outbreak as a pandemic in recognition of its rapid spread across the globe. This outbreak has also affected the GCC region including the Kingdom of Saudi Arabia. Governments all over the world took steps to contain the spread of the virus.
Saudi Arabia in particular has implemented closure of borders, released social distancing guidelines and enforced country wide lockdowns and curfews.
In response to the rapid spread of the virus and the resulting disruption of some social and economic activities and business continuity, the Fund Manager has taken a series of preventive and precautionary measures, including activating of remote work to ensure the safety of its employees and their families.
The impact of the pandemic on the Fund’s operations and financial results till the date of the unaudited interim financial statements has been reflected in the net assets value and investments value. These developments could further impact our future financial results, cash flows and financial condition and the Fund Manager will continue to assess the nature and extent of the impact on its business and financial results.
12. APPROVAL OF THE INTERIM CONDENSED FINANCIAL STATEMENTS
These unaudited interim condensed financial statements were approved by the Fund’s management on 7 Muharram 1443H (corresponding to 15 August 2021).
